The GBP EUR exchange rate was 0.30% higher on Tuesday after the British economy posted a strong employment report. The pound was strong after British employers added a record 241,000 staff last month, taking the total number of employees on company payrolls to just above the pre-pandemic level.
The GBP to EUR trades at 1.1750 after a strong bounce from around 1.1620.
UK employment figures beat market expectations
British employers were shown to have added a record 241,000 staff last month, with the total number of employees on payrolls now above the pre-virus level, according to official data on Tuesday.
The jobs number was a boost as the government prepares to end the furlough programme on September 30, which last month was still supporting around 700,000 workers.
Tuesday’s figures were a welcome improvement from July’s weak economic data, which saw the economic rebound levelling off and hundreds of thousands of workers had to stay home due to the pingdemic.
Gilt yields rose after the data with the two-year benchmark hitting its highest since the start of the pandemic and will see further pressure on the Bank of England to remove stimulus measures.
Businesses also reported more than 1 million vacancies in the three months to August, which is the highest since records began, while the unemployment rate fell slightly to 4.6%.
“The latest data brought more signs that labour market slack is declining fast and that labour shortages are contributing to faster underlying pay growth,” said Capital Economics.
During the three months to July, the number of people in employment rose by 183,000 after expectations of around 178k.
“Today’s statistics show that our plan for jobs is working,” finance minister Rishi Sunak said.
Staff shortages hinder further improvements
The jobs picture could be even better but the furlough scheme and the displacement of some foreign workers during lockdown has been a headwind. A lack of key workers such as truck drivers and food processing employees has affected the supply chain in the country.
“Ongoing supply and labour shortages are impeding further growth,” said Matthew Percival, director at the Confederation of British Industry.
The CBI and other business groups have also called on the government to temporarily relax new post-Brexit immigration rules in order to train new workers.
Businesses have been reporting wage pressure and Tuesday’s data showed average weekly earnings in the three months to July were 8.3% higher than the year before, just below the all-time high of 8.8%.
The ONS has warned that these increases should not be taken at face value as lower-paid jobs were more likely to have been cut during the lockdowns, and fewer people were now on reduced furlough pay.
Britain’s strong job market will provide a headache for the BoE as it judges the long-term effects of inflation and supply-chain issues. At last month’s meeting, the BoE’s policymakers said that some basic conditions for a rate rise had already been met, but others said there was still some slack in the job market.